As the Dutch government steps in to take control of Nexperia, a semiconductor manufacturer with significant ties to mainland China, concerns mount over potential supply chain disruptions in the automotive industry. With approximately 80% of Nexperia's production capacity based in China, OEMs worldwide face uncertainty as they scramble to secure alternative sources for critical components

On Oct. 13, the Dutch government took control of Nexperia, a semiconductor manufacturer owned by mainland China's Wingtech, citing national security concerns and governance issues. This intervention aims to safeguard critical technological capabilities in the Netherlands and Europe, as approximately 80% of Nexperia's production capacity is based in mainland China, raising alarms about potential supply chain disruptions in the automotive industry.

Who is exposed?

While German original equipment manufacturers have been the first to raise the alarm, OEMs across all regions, including North America, Japan and South Korea, are at risk due to their reliance on Nexperia's components.

S&P Global Mobility reviewed recent teardowns across some 100 light vehicles. Every vehicle analyzed uses dozens to hundreds of Nexperia chips. However, not all OEMs will have equal exposure because of their specific sourcing strategies and supplier relationships.

Due to the nature of Nexperia’s parts (standard logic and small discrete units) that are required on nearly every printed circuit board (PCB) — across all domains from powertrain to infotainment, to comfort electronics and advanced driver assistance systems — the vehicles that have the highest number of Nexperia’s parts (ranging from a hundred to several hundred per vehicle) are those with the highest electronics content, which are explicitly:

Vehicles with the fewest Nexperia parts are those competing in small and economy segments, which typically have less electronic content, independent of region.

When could the first disruption to car production come

There are reports that some tier 1 suppliers will run out of Nexperia parts as early as next week.

Our sources indicate that the current inventory in the industry should enable most suppliers to go through to the end of October. This assessment does not include possible inventory at distributors. 

Past that date, if there is no political resolution to the dispute between the Dutch and mainland China authorities, disruption among tier 1 suppliers could worsen.

What can tier 1 electronics suppliers do?

While Nexperia’s parts are easier to “drop in and replace” than system-on-a-chip (SoC), microcontroller units (MCUs) or application-specific devices, Nexperia’s broad portfolio adds complexity in the management of this substitution. It is unlikely that tier 1 suppliers or OEMs will be successful in finding a single alternative supplier for all of Nexperia’s parts;  they will have to locate different suppliers for the various diodes, transistors, electrostatic discharge (ESD) protection devices, standard logic, and more.

Finally, S&P Global Mobility expects that stockpiling, which occurred in the 2021 chip crisis and amplified the shortage, could happen again as tier 1 suppliers and OEMs are likely to be on the hunt — buying all small discrete and standard logic parts from alternate suppliers that they can, building inventory where they can, and sometimes accumulating parts that will not match immediate needs. In short, panic buying — like in 2021 — could amplify and extend the critical situation.

Is this a full-blown supply crisis? It is too soon to tell, but currently, it is not. As the cause of the situation is political, it could theoretically be solved quickly without the need for expanding supply capacity. The longer it takes to resolve, the greater the likelihood of this becoming a broader-based crisis. 

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